Federal Environmental Policy Misallocates Local, Interstate, and Climate Problems

Jonathan Adler’s central claim is that American environmental law has a jurisdictional mismatch: too much federal regulation governs environmental questions that states and localities are better positioned to answer, while too little federal attention is directed at the cases where federal authority has its strongest justification.

The problem, as Adler framed it, is not simply that federal regulation is too aggressive or too lenient. It is that the country has not allocated responsibility according to either constitutional structure or economic logic. The federal government and state governments each have responsibilities, and environmental problems vary in scale, information requirements, and spillover effects. A rational allocation would ask which level of government is best positioned to bear costs, capture benefits, use relevant knowledge, and prevent externalization. Adler argued that the actual system “has been somewhat haphazard.”

The conventional justification for federal environmental law, in Adler’s account, rests on a story that is too simple: states and localities failed to protect the environment, so the federal government had to step in. He called that “the standard fable.” The fable says federal environmental regulation was a necessary response to the failure of states, localities, and private organizations. Adler’s objection was not that federal action never had a role. It was that the historical story often used to justify the structure of federal law is false or at least seriously incomplete.

His opening example was the Cuyahoga River fire. The Cuyahoga became an emblem of the modern environmental era, especially after Time published a dramatic photograph in 1970 and the fire became associated with the push toward federal water regulation. Adler noted that the image commonly used to represent the 1969 fire was not actually a photo of that fire. The closest visual record of the 1969 fire is much less dramatic, he said; the fire lasted about 20 minutes and was “something of a non-issue” because river fires had once been common on industrialized waterways.

The dramatic image Time used was from a 1952 fire, which Adler described as a true inferno that caused substantial damage and could have caused loss of life had it not occurred on a weekend. He also showed a 1912 newspaper clipping reporting a river fire in which five men died. The point was not antiquarian. It was that the 1969 Cuyahoga fire became a national symbol at a moment when the underlying problem had already become much less common.

Adler’s formulation was direct: “The federal government did not intervene because state and local governments had failed to act. It intervened because there was demand for environmental protection.”

Adler extended that claim beyond the Cuyahoga. Most major environmental problems that attracted concern in 1969 and 1970, he argued, were already moving in the right direction before the major federal statutes were adopted. He referenced water pollution data from Keiser and Shapiro, shown in a slide labeled “Water Pollution Trends, 1962–2001,” with charts for dissolved oxygen deficit and the share of waters not fishable. He said he could show similar data for air pollution, wetland conservation, and other areas. In some cases, he said, progress was greater before federal statutes than after, likely because of diminishing marginal returns.

The causes of national regulation, in Adler’s telling, were more political and institutional than the standard story admits. Environmental awareness and understanding had increased, creating demand for more action at all levels. Politics had become increasingly nationalized: a river fire that would have been a local story decades earlier could, by 1969, become a national symbol. There was also profound distrust of states and federalism in the 1960s, much of it rooted in reasons outside environmental policy. If many states could not be trusted to protect citizens from violence based on race, Adler asked, why would people trust them to be forward-looking on environmental protection? Finally, there was rent seeking: firms benefited from national regulation that standardized markets, imposed costs on competitors, or helped them gain market share.

That history matters because it changes the policy question. If federal intervention is not best understood as a rescue operation after state failure, then the federal role must be justified on more specific grounds.

Adler identified several plausible bases for federal environmental action: interstate spillovers, national public goods, technical expertise, economies of scale, and the alleged race to the bottom. He treated interstate spillovers as the strongest case. If Ohio electricity generation produces air pollution that harms Vermont, Ohio has no natural incentive to reduce emissions merely for Vermont’s benefit. That is a genuine reason for federal involvement.

But Adler argued that relatively little federal environmental law is actually focused on interstate spillovers. The federal code contains page after page of environmental statutes and regulations, he said, but the part aimed at preventing one jurisdiction from externalizing costs onto another is “a tiny fraction” of what exists.

Other rationales were weaker in his account. National public goods may justify federal support, but regulation is not usually how public goods are supplied; subsidies, research, or data collection may be more appropriate. Technical expertise can justify federal research or information-gathering, but it does not automatically justify federal regulation. Economies of scale may justify uniform standards in some cases, such as products sold nationwide, but Adler said relatively little environmental regulation can be justified on that basis.

He was especially skeptical of the “race to the bottom” argument. It is frequently invoked, he said, but as an empirical matter in the United States the evidence does not support it. In some cases, he argued, the evidence points the other way: states learn from each other and improve their ability to satisfy environmental preferences. The race-to-the-bottom model predicts competitive pressure will cause states to under-regulate. Adler said that is not what the evidence generally shows.

His proposed frame was not “federal floors” or “federal ceilings.” When asked by the moderator about whether the federal government should set national minimum standards or cap what states can do, Adler rejected the framing. The proper question, he said, is whether states are bearing the costs and benefits of their own decisions or externalizing costs onto others. Federal action should be aimed at improving that alignment, not at setting generic boundaries around what trade-offs states may choose.

Adler put the risk of overstandardization plainly: “One size fits all is often one size fits nobody.”

Todd Myers approached environmental federalism from the level of practical administration. He described more than 25 years working on environmental policy in Washington State, including at the state Department of Natural Resources at the end of the spotted owl era, on the Puget Sound Salmon Recovery Council, and on the Hanford Advisory Board. Where Adler laid out the legal and theoretical structure, Myers emphasized what happens when management is close to, or far from, the people who experience consequences.

He organized the case for environmental federalism around three benefits: experimentation, sorting, and accountability. States can serve as laboratories of democracy, producing examples to imitate or warnings to avoid. Different jurisdictions have different preferences and risk tolerances; people who want Washington’s environmental priorities can live there, and those who prefer Idaho’s lighter regulatory approach can live there. Most important for Myers, decisions made nearer the people affected by them are more likely to force accountability.

The Quinault forestry example made that accountability claim concrete without relying on state government. The Quinault Tribe in Washington had cedar forests managed by the Bureau of Indian Affairs for timber revenue. According to Myers, the BIA’s mandate was to generate revenue, so it maximized harvest. It did not replant adequately and left so much slash that regrowth failed. The BIA also did not conduct environmental assessments before harvesting, he said, relying instead on a general plan for the area.

The tribe objected that the practice was not sustainable: forests were not regenerating, future revenues were threatened, and the landscape was damaged. The BIA’s answer, as Myers recounted it, was that its job was revenue generation. The physical and political distance mattered. The Quinault Reservation, on the Washington coast, was about as far from Washington, D.C., as one can get in the lower 48 states. Management authority and local consequences were detached.

When the Quinault Tribe eventually took over management, Myers said, it still harvested trees for revenue, but changed priorities. It replanted, protected streams, and managed for future forest productivity. He recalled asking the manager of the program to describe the philosophy. The answer, Myers said, was: “We manage like Weyerhaeuser.” They harvested timber, generated revenue, and distributed it to members, but under incentives more tightly tied to the long-term health of the forest.

The same example also showed how bureaucratic rules can change depending on who holds authority. Myers said that when the tribe took over, the BIA told the tribe it still had to sign off and that environmental assessments were required. The tribal members objected that the BIA had not conducted those assessments when it was managing the harvests itself. The BIA’s answer, in Myers’s telling, was essentially yes: the tribe had to do what the agency had not.

Washington’s response to the invasive “murder hornet” served a different purpose in Myers’s argument: local capacity can combine with technology and citizen participation. Myers, a beekeeper and then president of his beekeeping association, described the hornet as physically alarming even when dead and encased in plastic. Washington State enlisted beekeepers and citizen scientists, trapped a hornet, used a University of Washington student’s tracking device to follow it back to the nest, and destroyed the nest. The protective suit required was more robust than a normal bee suit, because the hornets can sting through ordinary bee suits. Myers treated the episode as a case in which state government, local knowledge, citizen participation, and technology combined to eradicate an invasive species.

He connected those examples to research on conservation governance. A slide quoted a systematic review of 169 publications titled “The role of indigenous peoples and local communities in effective and equitable conservation,” by Neil M. Dawson and coauthors. The highlighted abstract found a “stark contrast” between externally controlled conservation and locally controlled efforts, with positive conservation and well-being outcomes more often associated with cases where Indigenous peoples and local communities had central decision-making roles. Myers summarized the finding numerically: centralized-government projects achieved stewardship goals less than 20 percent of the time, while projects run by local communities or tribes did so about 50 percent of the time.

Myers did not present decentralization as a cure. He repeatedly stressed that state and local government suffer many of the same failures as federal government. His recurring target was distorted accountability: officials and voters may support policies for identitarian or emotional reasons rather than for measured environmental gains, and once policies fail, incentives to admit error are weak.

The Flint water crisis was his main cautionary case. Flint’s city government changed its water source; pollutants leached from pipes into drinking water; government agencies were slow to acknowledge and respond. Myers quoted the Michigan Department of Environmental Quality saying, “Anyone concerned about lead in the drinking water can relax,” which he said turned out not to be true. He also quoted an internal EPA response to possible funding for filters: “I’m not sure Flint is the kind of community we want to go out on a limb for.”

He then described the cleanup politics. The University of Michigan had developed an AI tool to identify likely lead-pipe locations in a city whose pipe system had accumulated over a century. The tool, Myers said, was working well and showed that lead pipes were concentrated in lower-income areas, while wealthier areas had newer pipes. But residents in wealthier communities objected that their pipes were not being dug up, did not trust the AI, and said their children were being used as an experiment. Political pressure led the city to abandon the tool and dig in wealthier areas, where Myers said they found no lead pipes, wasting time and money.

Bellingham’s solar-powered EV chargers illustrated how local environmental politics can reward symbolism over cost-effective stewardship. A standard EV charger cost about $15,000, Myers said, while a solar-powered version cost about $100,000 and was limited by the battery and by Washington’s modest sunshine. When he asked why the city was doing it, the answer he received was: “The city council thought it’d be nice if some of the power came from the sun.”

Decentralization therefore helps most when it changes the incentive structure, not merely when it changes the level of government. Myers’s final move was to suggest that technology can push environmental decision-making below federalism toward what he called “personal environmentalism”: tools that connect costs, benefits, and responses directly to individuals or small communities.

California’s September 6, 2022 electricity shortage gave him a demand-response example. When blackouts or brownouts were possible, the state sent a text asking people to conserve. Within 15 minutes, Myers said, demand fell by 2,000 megawatts, equivalent to all the battery power in the state at the time. People could turn off dryers or other loads without a formal incentive system. Technology made a dispersed, voluntary demand response possible.

His second technology example was eWATERpay, which provides internet-connected water pumps. A dashboard shown in the presentation reported 1,441,734,031 liters dispensed, 339,632 people served, 1,308 smart taps in service, and 94 percent of taps working. Myers said users pay about a penny a day for guaranteed clean water, and the company has an incentive to repair pumps when they break. He contrasted that with poor water access that forces women to hike for water, requires boiling water with consequences for deforestation, or pushes people toward plastic water bags.

For Myers, then, environmental federalism is valuable because it can tighten feedback loops. But it is incomplete unless institutions and technologies make those feedback loops real.

The most important distinction explored in the discussion was not between federal and state power in the abstract. It was over when state choices become a national problem because their costs spill beyond the state.

The moderator, Josh Rauh, raised a pipeline example from New England. Rauh said that, on a cold winter day, the Boston area imports about 25 percent of its energy needs as liquefied natural gas: gas cooled to minus 260 degrees Fahrenheit, loaded onto tankers, shipped to New England, and regasified. He said the region is only a few hundred miles east of the Marcellus Shale in Pennsylvania, but a pipeline from Pennsylvania to New England has not been built because New York blocked it. Rauh asked whether the federal government should set a ceiling on what states can do when one state’s regulatory decision imposes financial and environmental consequences on people and businesses in other states. He also said he could not imagine that the environmental consequences of building a pipeline would be greater than liquefying gas, shipping it by tanker, and regasifying it, while noting that he was a finance economist rather than an environmental scientist.

Adler answered by rejecting floors-and-ceilings language. He was not in favor of the federal government setting either. But if a state prevents neighbors from accessing energy sources, that may be a case in which the state is externalizing the costs of its choices. For Adler, that is the relevant federal question: whether federal action can help ensure that state and local communities bear both the costs and benefits of their decisions.

Myers agreed that the case was difficult. He compared it to interstate commerce. Reducing barriers to trade between states has generally been good, he said, and a regulatory barrier to energy infrastructure can be thought of as a regulatory version of a state barrier to trade. His instinct was to favor the federal role in opening interstate commerce, while acknowledging that such intervention has downsides.

Rauh then pushed the issue through California. If California uses environmental regulation in ways that hinder construction, housing, or high-speed rail, should that simply be California’s decision, with people sorting into and out of the state? Or do such choices have national consequences that justify federal intervention?

Adler’s answer again turned on externalization. If California imposes economic burdens on Californians through land-use regulation, he was prepared to let California make those trade-offs, even if he disagreed with them. The concern arises when California adopts rules that impose costs outside California while capturing benefits or “psychic benefits” inside the state. He cited California’s low-carbon fuel standards as an example where costs may be imposed beyond California. In such cases, the feedback mechanisms that allow jurisdictions to learn from their choices are weakened.

Myers gave an energy-market example from Washington. Washington has abundant hydropower that is cheap and dispatchable. California’s heavy solar production depresses prices in the middle of the day and then, as the sun sets and peak demand rises, California relies on Washington and others to fill the gap. Myers described this as the “duck curve” moving north. California’s policy choices, in his telling, drive up Washington’s spot and day-ahead prices. That can cause other states to take defensive actions that add cost without adding value. He saw a possible federal role in preventing those defensive spirals.

The same logic shaped Adler’s response to technical-capacity questions. An audience member asked whether states are capable of regulating something as complex as small modular nuclear reactors, especially if different states produce different rules. Adler said he was comfortable with more nuclear regulation at the state level, so long as externalities were not imposed on others. He had no reason to assume the federal government would make better choices for California than California would, or that a national standard would better match the needs and preferences of a diverse country.

He also warned against overusing technical expertise as a reason for national regulation. The federal government often has more technical capacity, but the historical record does not always show federal superiority. California, he said, led the federal government in understanding air pollution and the role of mobile sources such as automobiles. Federal vehicle standards emerged not because the federal government was necessarily more expert, but because automakers disliked the prospect of state-by-state standards and sought a national rule in Washington.

Adler acknowledged that economies of scale can sometimes justify national standards for products sold nationally. But he cautioned against overestimating the value of uniformity and underestimating the value of local variation. Some products create environmental consequences in one place that do not arise in another because local environmental conditions differ.

He added a more institutional concern: federal intervention can reduce state incentives to build their own capacity. Once the federal government occupies a field, states may invest less in technical expertise. If federal involvement is well-matched to the problem, that may be acceptable. But if the federal government centralizes an area where variation would have been beneficial, state capacity may atrophy and the country loses the benefits of decentralized experimentation.

Climate change exposed the limits of state-level environmental action more sharply than traditional pollution problems. Adler and Myers agreed that state climate mitigation often produces mismatched costs and benefits, though they framed the implications somewhat differently.

Jonathan Adler argued that the federal government has generally taken a lighter touch on climate than it has in many other environmental domains. One consequence of jurisdictional mismatch, he said, is that demand for environmental action at the state level gets expressed where the federal government is perceived not to act. States then do more than they should on climate mitigation, because they cannot capture the environmental benefits of those policies internally.

Mitigation differs from local pollution control because greenhouse gas reductions produce benefits globally, not within the regulating jurisdiction. A state can impose costs on its residents and businesses, but the environmental benefits largely accrue elsewhere. In Adler’s view, this means there is little reason to expect states to adopt mitigation policies that are beneficial in a cost-benefit sense. They may, however, design policies that capture economic benefits locally while pushing costs outward.

Adler’s preferred sorting was clear: if climate mitigation policies are going to exist, they should be pursued more nationally, where there is at least a better chance of matching the costs of the policy to the benefits it generates. At the same time, the federal government should spend less effort on environmental matters that state and local governments handle better. Climate adaptation is different. Adaptation concerns are often place-specific: water, infrastructure, land use, local risk, and local vulnerability. Those are the sorts of matters where local knowledge and local accountability are more valuable.

He also criticized policy instrument choice. The Clean Air Act, in his view, is not a practical way to think about climate policy. The federalism problem is therefore entangled with the question of which regulatory instruments are being used.

Todd Myers treated state climate policy as an example of sorting, but with a warning about honesty and incentives. If Washington State wants to do more than its share because its citizens are wealthy and prefer it, that is a decision they can make. But he argued that the actual environmental benefits to the state are tiny relative to the costs, while the political benefits are often emotional or identitarian.

His example was Washington’s cap-and-trade system. The state’s economic analysis, he said, used the social cost of carbon and concluded that the program generated a net benefit. Myers asked the Department of Ecology to separate the global social-cost-of-carbon benefits from the benefits to Washington State itself. He said the department declined, because the state-specific benefits would be “absolutely tiny compared to the cost.”

In his view, the mismatch causes states and localities to spend money on climate policies that do little for the planet compared with other possible uses of the same resources. The problem is not simply local autonomy. It is that political incentives can reward visible climate symbolism even when the real-world environmental gains are weak.

Climate litigation raised a related concern. An audience member asked about a Montana case based on the state constitution’s right to “a clean and healthful environment,” where plaintiffs argued that Montana’s failure to reduce greenhouse gases deprived young people of that right. The questioner argued that Montana’s share of greenhouse gases is too small to make a meaningful climate difference, but the litigation could impose substantial costs and encourage similar efforts in other states.

Adler did not view the Montana litigation itself as a broad threat because it rested on what he called the Montana Supreme Court’s idiosyncratic interpretation of the Montana Constitution, and few states have similar provisions. But he was concerned by the broader pattern of litigation that seeks to bypass ordinary policymaking. Courts can be used to override legislative choices, rather than letting elected officials choose climate policy and voters judge those choices.

That matters for federalism because decentralization is supposed to make trade-offs visible to those who bear costs and benefits. Litigation can bypass that process and externalize costs onto people not involved in the decision.

Myers added that climate lawsuits often seek particular policies but do not return to court when those policies fail to produce the promised outcomes. He cited a Washington State lawsuit in which his organization sued the Department of Ecology because it had stopped releasing climate data showing whether the state was on track to meet its own targets. Myers said the court held that citizens did not have a right to force the department to release the data. Environmental groups that supported climate lawsuits did not side with his organization in seeking the data, he said. To Myers, that suggested the lawsuits were about imposing preferred policies, not measuring whether those policies worked.

Small modular reactors provided a concrete test of the panel’s principles. Josh Rauh asked whether nuclear power should be regulated federally or whether, especially for small modular reactors, there is an argument for state-level regulation.

Jonathan Adler’s answer was short: he would be comfortable with a lot of it being done at the state level.

Todd Myers answered from his Hanford experience. He had served on the Hanford Advisory Board, overseeing cleanup of nuclear waste from weapons production rather than energy generation. In Washington, he said, the Department of Ecology oversees the cleanup on top of the Department of Energy and must provide permits. When he was involved, the Department of Ecology was 15 years behind in renewing the permit. For 15 years, the permit had simply continued while renewal lagged.

For Myers, the lesson was that duplicative bureaucracy can slow progress without improving outcomes. In an area like small modular reactors, he said, reducing overlapping regulatory oversight could encourage innovation. He pointed to data centers as a source of private demand for new energy, saying that Amazon, Microsoft, and others were promoting some of the most interesting small modular reactor work in Washington because they need reliable energy.

The practicality challenge came from the floor. Are states technically capable of regulating reactors? What happens if one state has one set of rules and another state has another? The questioner compared the problem to cars and catalytic converters, where California’s large market shaped national practice, but added that cars are simpler than nuclear reactors.

Myers accepted the need to ask whether the relevant jurisdiction is capable of performing the legitimate government function. Washington or California might be able to regulate small modular reactors, he said; the city of Seattle might not. But he argued that states already regulate serious technical issues differently, including genetically modified foods and climate-related policies. The existence of technical complexity does not automatically settle the jurisdictional question.

Rauh then sharpened the issue. If the federal government should not protect Californians from California’s own harmful land-use regulation, why should nuclear be different if the potential harm is localized? Adler agreed with the premise. If harms are not externalized, he was prepared to let states make their own choices, including bad ones. The stronger federal case arises when one state’s decision imposes costs on others.

That answer reveals the panel’s deeper consistency. Technical competence matters, but it is not the first principle. The first principle is alignment: who decides, who pays, who benefits, and who is harmed. Federal authority is easiest to justify where states export costs or where national scale is essential. It is harder to justify where the federal government merely substitutes a uniform national judgment for diverse local trade-offs.